Inside SAC Capital: Big Bets, Built Fast

3/22/2013 9:40AM

A WSJ analysis illustrates the aggressive trading style that led SAC Capital to become a successful—and controversial — hedge fund. WSJ Page One Editor John Carreyrou joins The News Hub for a look at the numbers. Photo: AP Images.

This transcript has been automatically generated and may not be 100% accurate.

... the the ... at A C Capital agreed to pay six hundred and fourteen million dollars last week in what federal regulators are calling the largest insider trading Simon Amor ... Wall Street Journal took a look inside the aggressive trading style that lead had time to become so successful and controversial ... joining me now for a hard look at the numbers is the beest page one editor John Kerry or something to be here ... thank you ... so maybe ... this huge settlement as were saying ... that with the largest whatever but denied any wrongdoing tell us how that came about and what if just quickly what that really means for those hedge funds that ... will that the settlement the was announced two weeks ago direction to move them um and the settlements were with the SEC's ... of the SCC has filed a civil suits against essay see ... an ICC decided that prompted was better off ... paying money for those cases to go away rather than engaging in protracted litigation ... aam ... parallel to those civil complaints there are criminal investigations that are still ongoing ... and one of those with far bigger those two settlements involve the case of its gonna be going to trial ... on the criminal side another four fold the excess AC portfolio manager has been indicted ... and has denied wrong wrongdoing and he'll be going to trial ... the Wall Street Journal ICG from analysis of the trading style S A C Capital is known for tell us about how the houses can about what that that's right um this is a firm that up for twenty years notes existed since nineteen ninety two ... has has put up incredible numbers ... returns of almost thirty percent year ... over twenty years is almost unheard of it's it's one the best records in the industry ... um ... then of course of their under scrutiny ... from prosecutors in from the SCC ... and not all that all that together made us want to take a closer look um and try to figure out how they do business ... aam and ... and so we ... didn't actually the reporting they went into this was was quite tricky we had two of build up our own database of of regulatory quarterly regulatory filings these these files are called ... thirteen apps that hedge funds and other ... investors filing recorder ... and um we have to amass them in and put them in our own proprietary database and then ... play with that pitted nice to see if we could ... get a an intelligent glimpse at how this from does business in the ... that in the main takeaway is that they build up stakes in stocks abruptly and massively ... before ... the market moving events often ... and aam and sometimes they do very well I think they stop jumps for example in one of the examples you talk about this all from its present ... that's right we look that seven trades in particular ... up to the seven involve the same stock Whole Foods and not ... they played the earnings of the company twice once in two thousand and nine ... and once in two thousand ten to position themselves with massive US states in this company tens ... of millions of dollars and ... each time they were right ... the company came out with earnings that were better than the market expected the stock popped ... and they presumably made a lot of money if they still hold the position they reported ... a month prior ... and they're not alone now and in employing this strategy though in a haphazard failures to act it had ... absolute iPad failures of the failure numbers of that we found were skewed heavily by of two thousand a crash ... um ... in fact what hedge funds but ... we look that had its huge number of bad bets that year ... as we all know that was a catastrophic here for for stocks ... um it's true also that Assisi isn't the only one of the quickly builds up ... stakes in stocks before market moving events ... without other hedge funds of the hedge funds that do the same thing like Citadel ... Ken Griffin's firm Chicago and the millennium ... another big New York hedge funds or they just ... started the rest of Allstate are they getting information in what is your take away from that that is there any way to know ... some of these trades look incredibly smart of the ... you know the Guardian trade between highlighted in our story today ... of them are traded in the ... summer of two thousandeight was just an incredible trade ... they'd suddenly built up a hundred and thirty seven million dollar position ... two weeks later the stock tops ... twenty two percent ... because the company's getting tickled getting taken over that's just incredible timing ... while it's great that interesting story I live in houses going into people's investment account this morning thanks ... for putting it as a PC and enforcing that ... more of that on the beest dot com